Freelance In 40 Days [Day 15]: Time Tracking… Proof You’re Not Goofing Off

Posted: September 22nd, 2009

From Yukon White Light (Flickr)

From Yukon White Light (Flickr)

This is Day 15 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today we’ll cover time tracking and evaluating your freelance business.

Tracking Time (Yes, You Need To Do It)

Every freelancer needs some measure of how their own freelance business is doing. After all, you need to know if you are operating in the red or are making enough for that steak dinner and pints on Friday. The first step to this is keeping track of your time spent in all aspects of your work.

I know I have bad memories of having to punch in into that little box on the wall each day at my old job. God forbid if you forgot to do it! I hate to break it to you but for freelancers it is a little more involved. All your time working and everything you did during that time has to be logged so you can evaluate your business to see if you are meeting income goals.

Don’t worry either. After a few weeks, you get the hang of it pretty quick.

To give you a breakdown on time tracking, your time spent working can be broken down as follows:

  1. Administrative Tasks: Non-billable tasks related to your business such as emailing, invoicing and customer support to clients.
  2. Promotion: Non-billable time you spend promoting your freelance business.
  3. Client Searching: Non-billable time hitting the job boards, following up on leads  and sending out project bids/estimates.
  4. Your Work: The billable time you actually spend working which generates your income.

To track your time, you could write it down on pads of paper or whip up an Excel spreadsheet, but there is software available that can make it far less of a chore. They’re even free to use:

  • Paymo Timetracker: This is one I personally use which is web based but also offers a desktop download for easily entering time data and downloadable reports.
  • SlimTimer: Similar to the above. An easy-to-use web based time tracking utility with useful reports.

Evaluating Your Business

After a few projects under your belt, a little income in the bank account and your freelance business rolling, an evaluation needs to be done to determine if you are on track with your income goals. These should be done on a monthly basis from here on out.

In the last tutorial we calculated your total billable hours to be roughly 1,800 and non-billable hours to be around 200 for the year. Also, it was explained that you are not likely to spend all the billable hours working on projects if you are new to freelancing. The reason being that time has to be spent promoting your business and developing a client base.

So, initially your billable time spent on projects will be lower than expected due to spending more time searching for work and promotion. This should improve over time, however, but evaluating your progress is the only way to make sure of this.

For starters, we’ll need to have handy the following:

  1. Your desired hourly rate, calculated from the last tutorial
  2. Your calculated billable hours for the year divided by 12 to get billable hours for the month
  3. Your income for the current month
  4. Your business-related expenses for the current month

Each month, take the income total and subtract from it the business expenses for the month. Then divide this result by your monthly billable hours to get your average rate for the month. Compare this result to your desired hourly rate.

Is the average rate for the month about the same or higher than your hourly rate? If so, congratulations, you are right on par with your business. Keep doing what you are doing.

Is the average rate for the month significantly lower than your hourly rate? Then there is no need to panic. It is common for new freelancers to spend more time searching for clients and bidding on projects.

Even for freelance veterans, there will always be some months where this is the case, too. It is important, however, that you make sure your average monthly rate is steadily improving so this doesn’t carry on month to month.

Eventually, with enough projects done, you will notice that repeat work and referrals will increase which will mean spending less time promoting your freelance business and searching for clients. This comes with experience so be patient.

Your Homework For Today

The purpose of today’s tutorial is to get you started with time tracking early on as a freelancer so you are using it with your first projects and develop the habit of using it on a consistent basis.

Set up an account on one of the free online softwares mentioned above and kick the tires familiarizing yourself with it. If you opt to use Excel or another method that suits you, then perfect. Just don’t skip this though.

You may or may not already have projects started and, if you don’t, that’s fine. Refer back to this tutorial, though, since it will be important down the road in your freelance career.

More on the author, Johnny Spence
Johnny is the founder of The Freelance Rant and a freelance web programmer with 8 years in the business. Have a visit at his company Oscarrr!web or see what he's up to on Twitter.

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